The Co-operative Bank of Kenya yesterday announced a 24.5 per cent profit reduction in full-year earnings to December 2020 with earnings plunging to Ksh.10.8 billion from Ksh.14.3 billion.
The reduced profit is largely contributed by a higher cover for loan defaults with the provision costs expenses tripling to Sh8.1 billion from Sh2.5 billion in 2019.
Co-operative Bank Group Managing Director Gideon Muriuki said the bank will continue to deploy mitigation strategies including digitization in managing the current macro-economic environment.
“The Co-operative Bank Group has put in place a proactive mitigation strategy anchored on a strong enterprise risk management framework, to enable uninterrupted access to banking services,” he said.
According to Muriuki, the reduction to increased loan provisions in Covid-19 related losses coupled with absorption of currency translation losses in it’s South Sudan operations.
“The South Sudan unit which is a joint venture deal with the government of South Sudan at 51 per cent and 49 per cent, respectively made a profit before tax of Sh107.8 million in 2020,” he said.
The higher defaults cover is on the back of a steep rise in the lender’s non-performing loans (NPLs) which hit Ksh.59.1 billion at the end of the year from a lower Ksh.31.6 billion.
Cooperative however, managed to grow its core revenue streams with net interest income rising to Sh36.3 billion from Sh31.3 billion while non-interest funded income (NFI) grew by a marginal 1.7 per cent to Sh17.5 billion.
Total operating income in the year meanwhile stood at Sh53.8 billion from Sh48.5 billion.
In spite of issuing a profit-warning on the expected results, the bank has held off concerns on profitability to declare a final Sh1 dividend, the same as in 2019.
Co-operative’s earnings per share declined in the period to Sh1.98 from Sh2.48 on the back of the profitability slack.
The bank’s latest acquisition, Kingdom Bank Limited, returned a loss of Sh76.3 million but is expected to mark a turnaround in 2021.
He added that they shall continue to pursue strategic initiatives that focus on resilience and growth in the new normal as the nation focuses on Covid-19 containment programs and as vibrancy returns to the economy.
